Objectives Studies in rheumatoid arthritis (RA), osteoarthritis (OA) and mice with arthritis demonstrated tyrosine hydroxylase-positive (TH+) cells in arthritic synovium and parallel loss of sympathetic nerve fibres. The exact function of TH+ cells and mode of TH induction are not known. Methods Synovial cells of RA/OA were isolated and cultured under normoxic/hypoxic conditions with/without stimulating enzyme cofactors of TH and inhibitors of TH. We studied TH expression and release of cytokines/catecholamines. In vivo function was tested by cell therapy with TH+ neuronal precursor cells (TH+ neuronal cells) in DBA/1 mice with collagen type II-induced arthritis (CIA). Results Compared with normoxic conditions, hypoxia increased TH protein expression and catecholamine synthesis and decreased release of tumour necrosis factor (TNF) in OA/RA synovial cells. This inhibitory effect on TNF was reversed by TH inhibition with alpha-methylpara-tyrosine (alpha MPT), which was particularly evident under hypoxic conditions. Incubation with specific TH cofactors (tetrahydrobiopterin and Fe2+) increased hypoxia-induced inhibition of TNF, which was also reversed by aMPT. To address a possible clinical role of TH+ cells, murine TH+ neuronal cells were generated from mesenchymal stem cells. TH+ neuronal cells exhibited a typical catecholaminergic phenotype. Adoptive transfer of TH+ neuronal cells markedly reduced CIA in mice, and 6-hydroxydopamine, which depletes TH+ cells, reversed this effect. Conclusions The anti-inflammatory effect of TH+ neuronal cells on experimental arthritis has been presented for the first time. In RA/OA, TH+ synovial cells have TH-dependent anti-inflammatory capacities, which are augmented under hypoxia. Using generated TH+ neuronal cells might open new avenues for cell-based therapy.